TY  - UNPD
A1  - Bannier, Christina E.
A1  - Schürg, Carolin Victoria
T1  - Corporate investment, debt and liquidity choices in the light of financial constraints and hedging needs
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 509
N2  - We examine firms’ simultaneous choice of investment, debt financing and liquidity in a large sample of US corporates between 1980 and 2014. We partition the sample according to the firms’ financial constraints and their needs to hedge against future shortfalls in operating income. In contrast to earlier work, our joint estimation approach shows that cash flows affect the corporate decisions of unconstrained firms more strongly than those of constrained firms. Investment-cash flow sensitivities are particularly intense for unconstrained firms with high hedging needs. Investment opportunities (as proxied by Q), however, play a larger role for constrained firms with the effects being strongest in case of low hedging needs. Interestingly, constrained firms with low hedging needs are found to employ more debt to finance their investment opportunities and build up significant cash holdings at the same time. Our results hence indicate overinvestment behavior for unconstrained firms but no underinvestment for constrained firms if they have low hedging needs.
T3  - CFS working paper series - 509 
KW  - cash flow sensitivity
KW  - investment
KW  - debt issuance
KW  - cash holdings
Y1  - 2015
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/38279
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-382797
UR  - http://ssrn.com/abstract=2643550
IS  - August 11, 2015
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -